The Danish wind energy company Orsted has put up a $100 million guarantee that it will build New Jersey's first offshore wind farm.
But it will lose that money if the project is not operating by Dec. 2025 — a year after the deadline approved by state utility regulators.
New Jersey's Board of Public Utilities approved an agreement Wednesday with Orsted under which the company would forfeit the money if the project is not up and running within 12 months of a series of deadlines previously ordered by the board.
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Those deadlines call for the project to reach commercial operation in stages by May 1, Sept. 1 and Dec. 1, 2024. But it would forfeit the guarantee money if the project is not operational by December 2025.
The money put up on Oct. 4 by Orsted and placed in an escrow account was required under the terms of a law Gov. Phil Murphy signed in July allowing Orsted to keep federal tax credits that it otherwise would have had to return to New Jersey ratepayers.
The Democratic governor, who wants to make New Jersey the East Coast hub of the nascent offshore wind industry, said the tax break was needed. He said it would help Orsted complete the project in the face of financial challenges buffeting the industry. which also faces substantial political opposition, mostly from Republican legislators and their supporters.
As an example, on Thursday, New York regulators rejected a request from companies for larger subsidies to complete large-scale wind, solar and offshore wind projects, saying the expected the companies to abide by the terms of their deals with the state.
Orsted said in a statement that Wednesday's approval by the New Jersey utilities board "continues the process of complying with the statutory requirements outlined in legislation signed by Governor Murphy earlier this year."
But it did not address its own timetable for completing the first of two offshore wind projects it plans to build off the New Jersey coast.
In August, Orsted said the project would be delayed until 2026 due to supply chain issues, higher interest rates, and a failure so far to garner enough tax credits from the federal government.
The company said during an earnings conference call that it could be forced to write off about $2.3 billion on U.S. projects that are worth less than they had been. It also said it had considered simply abandoning the Ocean Wind I project off the southern New Jersey coast, but decided for the time being to stick with it.
The company did not respond to repeated requests Wednesday and Thursday for clarification of its timetable for the project. Its website says only, "The project is scheduled to become operational in 2025, with final commissioning in 2026."
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An affidavit filed with the board last month by David Hardy, CEO of Boston-based Orsted North America, committed the company to carrying out the project once the board approved the guarantee, which was done on Wednesday.
"I can affirm that Ocean Wind I shall complete and operate the Ocean Wind I approximate 1,100-megawatt qualified offshore wind project," he wrote.
Orsted has federal approval for the Ocean Wind I project, and has state approval for a second New Jersey project, Ocean Wind II. Under Wednesday's agreement, the company would get its $100 million back if it does not receive all the government approvals it needs to build and operate the first project.
If Orsted forfeits the money, it could be returned to New Jersey utility ratepayers.
